TelferYoung (Waikato) Limited
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Waikato Newsletter - November 2004
1 November 2004
The Christmas season is approaching after a further ten months of strong market activity both locally and nationally.
About this time last year, after a similar period of activity we anticipated a slow down with "normal" market activity from the middle of 2004. Our anticipation was largely on the basis that the current level couldn't keep going!
We thought it opportune to look back over the last two years at this time and at what might be on the horizon.
Since our last newsletter we have welcomed Andrew Don to TelferYoung as a valuer working in the commercial/industrial market. Andrew was most recently with Opus as the principal property consultant involved with contract and property management and valuation work of specific property. |
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In late 2002 and early 2003 the market was strengthening. Key economic indicators then and now include:-
| June 2002 | June 2004 |
| |
| Net migration | 32,800 | 22,000* |
|
| US Dollar | 49c | 63c |
|
| 90 Day Bill | 5.96% | 6.07% |
|
| Reserve Bank OCR | 5% | 5.68% | |
| Unemployment | 5.1% | 3.6% |
Low bank deposit interest rates and poor performance of managed funds were perhaps reasons for a growing demand in property as an investment.
Residential
In March 2003 sale volumes and medians started a steady increase.
Strong growth in the Hamilton market and a limited supply of listings has maintained a surplus of demand over supply.
 Median house prices Click for a larger image |
The outlook for continued growth looks strong with block subdivisional land for development 2006/7 being competitive amongst developers. Block land values have risen.
| River Rd | 09/03 | $5,245,000 | 14.69ha | $35.71/m2 |
| River Rd | 09/03 | $1,650,000 | 4.05ha | $42.85/m2 |
| River Rd | 0/04 | undisclosed | 4.06ha | $43.33/m2 |
| Sylvester Rd | 08/04 | $2,650,000 | 7.22ha | $36.66/m2 |
| River Rd | 09/04 | $2,130,000 | 4.28ha | $52.50/m2 |
| Borman Rd | 10/04 | $6,500,000 | 17.30ha | $37.55/m2 |
Commercial/Industrial
In late 2002, early 2003 a "good" investment property in terms of quality of building, tenant, lease and location were attracting returns of around 9.0%. Examples of this is include:-
- Repco - Te Rapa Rd, $1,127,000, 9.01% - 6yr lease
- McCaw Lewis - London St, $1,875,000 - 9.0% - 6 yr lease
Similar investments are now around 8.0% - 8.25%.
- $2 Shop, Victoria St, $1,260,000, 8.17% - 6 yr lease
- Equipe Safety/Burnsco, Karewa Pl, $1,410,000, 8.02% - 6 yr & 9 yr lease
Continued low vacancy of good office space has seen new office development. These include:-
- 2 new buildings with two floors each totalling 2760m2 at 1 London Street.
- 4 new floors in the Bridgewater development totalling 4000m2.
- Mark Mitchells new office on Victoria Street north of 580m2.
Of this new space nearly all is taken with about 10% of the 7340m2 being vacant. New levels of office rental range from $175/m2 to $200/m2 net.
The wider office market is now seeing these increase through new lease agreements and rental review of existing space.
Another aspect of the market is the purchase of office accommodation for owner occupation recent sales include:-
- Blue Wallace - 25 Harwood St
- Cemac - 22 Harwood St
- O'Sheas - 70 Rostrevor St
- Wrightsons - Cnr Vialou/Rostrevor St
Industrial land values have risen dramatically. Sales in McKee Street, Pukete highlight this.
 McKee Street Sales 2003 Click for a larger image |
The combined effect of rising land values and construction costs have meant a rise in the required rental return.
In the industrial market this has seen fewer design build developments as rent for workshop space nears $80/m2 and associated office at $130/m2.
Rural
Demand for rural land remains strong in the Waikato with most auctions held during April and May being well supported and properties selling under the hammer.
Some recent sales of significance include the following:
- 22.4640ha sold at auction midway between Hamilton and Cambridge for $1.58M.
- 50ha to the west of Hamilton and backing to the Waipa River sold June 2004 for $2.8M.
To date bank interest charges appear to have little affect on the rural/residential market. A recent sale of 2633m2 vacant land overlooking the Waikato River was for $365,000. Another property north of the City with river frontage sold recently for $460,000 being 6025m2.
Outlook
New development on the horizon includes:-
- Redevelopment of the WINTEC City campus
- Completion of The Warehouse central city
- Completion and further establishment of The Base development at Te Rapa
- New supermarket and retail development around Thomas Road, Rototuna
- Confirmation of Toll and Fonterra's development plan for an inland port
- Completion of the CTC air training development at Hamilton Airport and potential for development of other airside activity.
- City Council parking initiatives in the City Centre.
- Expansion of the Huntly Power Station
- The confirmation and construction of new transmission lines through the region
Underpinning the past and current activity has been strong growth in the City as it continues to establish itself as a business centre.
Important to the continued growth are the confirmation of Toll and Fonterra's plans, the promotion and development of the potential associated with the airport and continued development of the Cities infrastructure including the completion of the expressway to Auckland.
Back issues of the newsletter can be obtained from TelferYoung (Waikato) Ltd
ph 07 839 2030
Fax 07 839 2029
489 Anglesea Street,
Hamilton
www.telferyoung.com
email: telferyoung@waikato.telferyoung.com
+ Doug Saunders + Roger Gordon + Andrew Don + Bill Bailey + Rob Smithers + Liz Allen + Cameron Roache + Jeff Alexander + Richard Graham + Yoon-Jin Cha + Russel Flynn
Opinions expressed in this newsletter are of a general nature and should be used as a guide only. TelferYoung should be consulted before acting on this information.